A new report from the Alaska Department of Labor and Workforce Development says that, following 10 years of steady increase, employment in Alaska’s oil industry dropped from 14,100 in 2015 to 11,100 in 2016. The report, written by DLWD economist Neal Fried and published in the department’s Alaska Economic Trends magazine, also comments that the history of oil employment in Alaska shows significant fluctuations in employment levels over the years - the 10-year period of job growth that has just ended was preceded by 15 years of job losses.
The job counts only include direct employment in oil companies and oilfield service companies, and do not cover jobs in other service industries such as the catering, transportation and security businesses that support companies directly involved in oil development and production, Fried wrote.
Also, because the oil jobs have relatively high wages and salaries, the oil industry job losses tend to have a somewhat magnifying impact on the overall loss of earnings in the Alaska economy. Direct oil industry jobs, while representing 4 percent of employment in Alaska in 2015, accounted for 11 percent of the total wages in the state in that year. Oil industry total wage growth between 2005 and 2015 amounted to 123 percent, topping out at $2 billion in 2015. That compares with a growth of 50 percent for all Alaska industries, Fried wrote.
Viewed on an individual basis, average earnings in the oil industry, at $139,704 per year in 2015, came in more than 2.5 times the overall statewide average.
Up-and-down history
Fried recounted the up-and-down history of Alaska’s oil industry employment. Following the zenith of North Slope oil production in 1988, oil industry employment fell below 8,000 in 1989. But, with the subsequent development of the Alpine and North Star fields, employment spiked again in 2001, before falling again later that year. Employment then leveled out at about 8,000 through to 2004. Above average oil prices then triggered an upsurge in projects such as the West Sak development and Prudhoe Bay field maintenance, with a corresponding increase in employment levels. The millions of dollars spent remedying BP’s North Slope oil pipeline leak in 2006 also created more employment.
A subsequent surge in oil prices to record levels attracted new players such as Pioneer Natural Resources and ENI to developments in the nearshore waters of the Beaufort Sea, while encouraging large investments by ConocoPhillips; Shell’s massive offshore exploration program; and ExxonMobil’s Point Thomson development. Hilcorp Energy and others caused an upswing of activity in the Cook Inlet basin.
This new oil industry activity, along with continuing maintenance of oilfield assets, led to a major expansion in oil industry employment levels, with employment exceeding 11,000 in 2007 and 12,000 in 2008 before peaking at 14,100 in 2014 and 2015.
Following the slump in oil prices in the second half of 2014, the oil industry employment trend turned from climb to fall in May 2015, with the rate of job losses steadily increasing through June 2016. It is unclear how long this current downward trend will continue, with the price of oil playing a critical role in future employment levels, Fried suggested.
Although in terms of absolute numbers the job losses in the current industry downturn are the largest of any of the major downturns seen in Alaska, in terms of the percentage of jobs the downturn resulting from the low oil prices in the period 1991 to 1997 was actually more severe - the initial number of oil industry jobs was lower in that era than at the start of the current job decline, thus leading to the higher percentage fall. Significant falls in oil industry employment also took place in the periods 1985 to 1987, 1998 to 1999, and 2001 to 2003.
Fried cautioned, however, that the data he has presented consist of monthly averages for each year. This averaging can smooth out and thus hide what can be high levels of job count volatility between one month and another, he said.
And almost all oil industry jobs are located in just three regions of the state: 65 percent on the North Slope, 26 percent in Anchorage and 7 percent on the Kenai Peninsula.
Residence
The majority of workers who were resident in Alaska in 2015 lived in the Municipality of Anchorage (5,121); followed by the Matanuska-Susitna Borough (2,713); the Kenai Peninsula Borough (2,536); the Fairbanks North Star Borough (855); and the Valdez-Cordova census area (153).
The Matanuska-Susitna Borough is particularly interesting, the report said, because the borough has neither oil industry employment nor production, but residents working in the industry earned $281 million - compared to a total locally generated payroll of $906 million. Eight percent of Mat-Su workers commuted to the North Slope, the report says.
Based on Permanent Fund Dividend eligibility, 36.4 percent of oil industry workers in 2015 were nonresident in Alaska, earning 34 percent of oil industry wages, some $708 million. The report said that on average industry nonresidents earned $105,158 per year, compared to $118,092 for residents.
The 2015 residency rate compares to 29.5 percent nonresident workers in the industry in 2005. The 2015 nonresident rate is the highest for the 2005-15 period; the low was 28.1 percent nonresident workers in 2009.
